Who Needs a Public Insurance Adjuster?

Physician's Money Digest, February15 2004, Volume 11, Issue 3

Many people are aware of theability to hire a buyer'sagent in the real estateindustry to represent theirinterests as they search for a new home.However, not as well known is anotheradvocate available to consumers: thepublic claims adjuster or public insuranceadjuster. Basically, a public claimsadjuster works on behalf of the insured inthe event of a claim. They may representboth individuals and businesses, but mostwork with individual policyholders.

Adjuster Regulations

Public adjusters are regulated primarilyat the state level. They normally arenot allowed to handle automobile, bodilyinjury, or third-party claims of estates ortrusts. In Illinois, for example, a publicinsurance adjuster cannot provide servicesuntil a written contract with theinsured has been executed on a form filedwith and approved by the director ofinsurance. At the option of the insured,any such contract that is executed within5 days after conclusion of the loss-producingoccurrence will be voidable for 10days after execution.

A license is required for claimsadjusters to operate in most states.According to the Illinois Department ofInsurance, no person may engage in thebusiness of adjusting insurance claims,advertising, soliciting, or holding themselvesout to be a public insuranceadjuster, or attempt to obtain a contractfor public adjusting services, unlesslicensed or registered in accordance withthe state. Exceptions are persons admittedto the practice of law, to licensedagents adjusting loss or damage under apolicy within their control, and to marinesurveyors or average adjusters.

Damage and Fees

Employing an adjuster isn't necessaryfor minor property damage. However, if aclaim is large enough (at least $10,000 to$25,000) or results in a significant disruptionto your lifestyle, you may want toconsider hiring an adjuster. They provideassistance in claims related to windstorms,explosions, inland marines, businessinterruptions, rental incomes, additionalexpenses, improvements and betterments,and other insured losses. Othercircumstances that may facilitate theirhiring include lack of time to follow upon your claim, losing loved ones in theincident, experiencing a partial loss, andoutsourcing a business-related loss.

Public claims adjusters are typicallycompensated on a contingency basis calculatedas a percentage of the claim settlement.While adjusters may chargebetween 5% and 50% of the claim settlement,typical fees are around 10%. Thisfee isn't paid until the insurance companyactually issues the check to the insured.

What services do you receive inexchange for this fee? Generally, professionalpublic adjusters will complete adetailed estimate of repairing or rebuildingyour premises. They will assist in thepreparation of inventories and determinethe approximate current values. Theyprepare losses related to time and establishcommunication with the insuranceadjuster, meeting with the insurance companyto negotiate the claim.

Finding an Adjuster

Because time is a luxury after an incidentoccurs, it may be prudent to beginthe search for a public adjuster before youhave a claim. The following are somehelpful assets for this process:

  • Word of mouth. Talk to peoplewho have had a positive experience witha claims adjuster.
  • Your insurance agent. Ask aboutthe adjuster's reputation.
  • State insurance office. Most statesregulate public claims adjusters.
  • Candidate interview. Ask aboutrates, references, and credentials.

Another resource is the NationalAssociation of Public Insurance Adjusters(NAPIA; www.napia.com). The NAPIArepresents over 100 of the industry's largestfirms and maintains a database ofmembers with at least 2 years' experiencewho adhere to a professional conductcode. Certification programs are alsoadministered by the NAPIA.

Evaluating Adjusters

What is the insurance industry's viewof the public claims adjuster? Some insurersassert that their claims department isstaffed with professionals who try tomake the claims process as easy as possiblefor their policyholders, and thereforequestion the value of paying a publicadjuster's fee. Consequently, there arecases of company adjusters becoming suspiciousor even antagonistic when dealingwith a public claims adjuster.

However, a number of public insuranceadjusters maintain that most insurancecompany professionals will actuallyprefer to work with an experienced,accredited claims adjuster rather than aninexperienced policyholder.

J. Tim Query is a professor offinance, risk management, and insurance at Illinois Wesleyan University.He is involved in personal financial planning and personalrisk management consulting. He welcomes questions or comments at 205 BeecherStreet, Bloomington, IL 61702; 309-556-3827; or tquery@iwu.edu.